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Alabama exchange overview

Alabama uses the federally facilitated marketplace, which means residents enroll in exchange plans through HealthCare.gov. For 2020 coverage, open enrollment has been extended until December 18, 2019 at 3 a.m. Eastern. Enrollments completed by that time will have coverage effective January 1, 2020.(Enrollment outside that window requires a qualifying event.)

Blue Cross Blue Shield of Alabama was the only health insurance carrier offering plans in the Alabama exchange in 2017, and they already insured the majority of the state’s exchange enrollees prior to 2017, when there were multiple insurers offering coverage. But since 2018, residents in the Birmingham area have been able to choose from two different insurers in the exchange, as Bright Health now offers plans in that area.

2016 was the first year that Alabama participated in the rate review process for ACA-compliant plans (for 2017 coverage). Prior to that Alabama did not have an effective rate review process, so the federal government handled rate review for Alabama. The federal government still conducts rate review for Oklahoma, Texas, and Wyoming, but Alabama has joined the majority of the states that have an effective rate review process.

2020 rates and plans

Two insurers offer plans in Alabama’s exchange. The following average rate changes were approved for 2020:

Bright Health: 8.98 percent increase. According to Bright’s rate filing for 2020, the insurer has 3,266 policyholders (the total number of members is redacted). Bright Health offers plans in the Birmingham area (Jefferson, Walker, and Shelby counties).

Blue Cross Blue Shield of Alabama: 3.5 percent increase. According to BCBSAL’s filing, the insurer has 123,368 policyholders in Alabama.

Blue Cross Blue Shield of Alabama has nearly all of the individual market share in the state, so the weighted average rate increase for 2020 is very similar to BCBSAL’s 3.5 percent increase.

Average rate changes are calculated before premium subsidies are applied, and 95 percent of Alabama exchange enrollees receive premium subsidies. The upper income limit for subsidy eligibility continues to increase (because the federal poverty level increases each year). A family of four earning $103,000 is eligible for subsidies in 2020 (in 2014, the upper income limit for subsidy eligibility for a family of four was $94,200).

Alabama has not expanded Medicaid, so there’s a coverage gap in the state (the state could close the gap by accepting federal funding to expand Medicaid; the federal government would always pay at least 90 percent of the cost to do so). As the federal poverty level increases, the lower income requirements for premium subsidy eligibility also increases, potentially trapping more people in the coverage gap. In 2020, a single person must earn at least $12,490 in order to qualify for premium subsidies in Alabama.

Premiums were lower in 2019 than they were in 2018

Both of the Alabama exchange insurers implemented 2019 rates that were lower than their 2018 rates. Bright Health had an average rate decrease of 15.55 percent. And Blue Cross Blue Shield of Alabama had an average rate decrease of 0.5 percent (ranging from a decrease of 3.8 percent to an increase of 3.9 percent, depending on the plan). These rate changes were approved as-proposed for both insurers.

As was the case in 2018, the cost of cost-sharing reductions (CSR) continued to be added to silver plan rates for 2019. This makes premium subsidies larger than they would otherwise have been, allowing some enrollees to find particularly good deals on bronze and gold plans (the cost of CSR isn’t added to those plans, but the larger premium subsidies can be applied to them).

Both insurers noted in their rate filings that they expected increased morbidity (ie, a less healthy population, and thus premiums that are higher than they would otherwise have been) as a result of the elimination of the individual mandate penalty after the end of 2018, and the expansion of short-term health plans and association health plans. So although the insurers decreased their average premiums in Alabama in 2019, they would have decreased them even more if the individual mandate penalty had remained in place and if short-term and association health plans hadn’t been expanded by the Trump Administration.

For perspective, here’s how average premiums have changed in Alabama’s exchange over the years:

In 2018, average rates increased by 15.6 percent (as described below, the bulk of the increase applied to silver plans, due to the Trump Administration’s decision to stop funding cost-sharing reductions).

In 2017, when Blue Cross Blue Shield of Alabama was the only insurer offering plans, their average rates increased by 36 percent (2016 was the first year that the state took part in the rate review process for ACA-compliant plans (for 2017 coverage); in previous years, the federal government handled the review process, as Alabama did not have an effective rate review process. That changed in the spring of 2016 however, and the state collaborated with HHS to ensure that the rates and plans filed for 2017 were in compliance with ACA requirements. Although, like many other states, Alabama regulators do not have the power to reject rate increases or prevent them from taking effect.

In 2016, there were three insurers offering plans in Alabama’s exchange. Humana’s average rate increase was just under 9 percent, Blue Cross Blue Shield of Alabama’s was 28 percent, and UnitedHealthcare’s was 24.5 percent.

In 2015, Alabama premiums increased just 3 percent from 2014 rates, according to a study by the Commonwealth Fund.

Insurer participation in Alabama’s exchange over the years

Historically, Alabama’s health insurance market was considered one of the least competitive in the nation. And it remains a market dominated by Blue Cross Blue Shield of Alabama, which is currently the only insurer offering plans in most of the state (Bright Health also offers coverage in the exchange, but only in the Birmingham area).

Humana and Blue Cross and Blue Shield of Alabama sold individual health insurance through the federal marketplace in Alabama for 2014. UnitedHealthcare joined the exchange for 2015, offering plans in all 67 Alabama counties. Those three insurers continued to offer plans in Alabama’s exchange in 2016, but Blue Cross Blue Shield still covered the majority of the state’s exchange enrollees.

So enrollees with United or Humana coverage in 2016 had to switch to BCBSAL plans for 2017 if they wanted to remain insured. For perspective, Humana had 15,226 individual market members in Alabama in 2016, including both on and off-exchange. UnitedHealthcare expanded to offer coverage in all 67 counties in Alabama starting in 2015, and their total exchange enrollment in the state was 20,488 in 2015. That was about 12 percent of the total in 2015, up from just 5 percent in 2014.

Although BCBSAL was the state’s lone exchange insurer in 2018, Bright Health joined in the Birmingham area in 2018 and continues to offer coverage there in 2019.

How many people have enrolled in health plans through Alabama’s exchange?

166,128 people enrolled in private individual market plans through the Alabama exchange during open enrollment for 2019 coverage (November 1, 2018, through December 15, 2018). Nearly 37,000 were new enrollees, while more than 129,000 were people who already had coverage through the Alabama exchange in 2018. Ninety percent of the state’s exchange enrollees are receiving premium subsidies in 2019 (which bring their average premiums down from $669/month to just $123/month), and 69 percent are receiving cost-sharing subsidies.

Enrollment for 2019 is about 2 percent lower than it was in 2018, when 170,211 people enrolled. And that, in turn, was a 4.6 percent decrease from 2017, when 178,414 people bought coverage. As was the case in the majority of the states that use HealthCare.gov, peak enrollment came in 2016, when 195,055 Alabama residents bought plans in the exchange. Enrollment in most states that use HealthCare.gov has been declining since then.

The declines are due to a variety of factors, including the Trump Administration’s decision to sharply reduce funding for exchange marketing and enrollment assistance, and the shorter open enrollment period that started to be used in the fall of 2017. In addition, confusion about the status of the ACA, particularly the individual mandate, has played a role in the declining enrollment, as did much higher premiums in 2017 and 2018 for people who don’t get premium subsidies (people who do get premium subsidies are mostly protected from the impact of rate increases).

Although exchange enrollment in Alabama has been declining since 2017, it grew steadily from 2014 through 2016. For 2014, the first year that the exchanges offered coverage (with a six-month open enrollment period that began in the fall of 2013), a total of 97,870 people enrolled in plans through the Alabama exchange. The following year, for 2015 coverage, 171,641 people enrolled. And enrollment grew by another 14 percent in 2016, when more than 195,000 people enrolled.

Cost of CSR added to silver on-exchange plans starting in 2018

Blue Cross Blue Shield of Alabama confirmed in June 2017 that they would continue to offer coverage in all counties in the state in 2018. Their rates increased by an average of 36 percent in 2017, although subsidies increased enough to offset that for the vast majority of Alabama’s exchange enrollees. And for 2018, they implemented a rate increase less than half that size, despite the assumption (which proved correct) that cost-sharing reductions (CSR) would not be funded by the federal government, as well as an assumption that the individual mandate wouldn’t be well enforced (the mandate is still being enforced in 2018, but the penalty was eliminated after the end of 2018). So although rate hikes were steep for 2017, the rate increase for 2018 would have been in the low single-digits if it weren’t for the uncertainty caused by the Trump Administration.

For 2018, Bright Health joined the Alabama exchange, but only in the Birmingham metropolitan area.

The following average rate increases were implemented for 2018 in the Alabama exchange:

Blue Cross Blue Shield of Alabama (statewide): 15.6 percent average rate increase, although the bulk of the rate increase applies to silver plans. The approved rate increases were based on the assumption that cost-sharing reductions (CSR) would not be funded in 2018, and that the individual mandate would not be well enforced.

Bright Health (Birmingham metropolitan area): New to Alabama, so there is no applicable rate increase. But a revised rate filing submitted in August noted that the cost of CSR has been added to silver on-exchange plans for 2018 (but not to off-exchange silver plans)

The rate increases are largest for silver plans because those are the plans to which cost-sharing reductions (CSR) apply. BCBSAL’s rate filing noted that “the proposed rate increases for the QHP silver plans are much higher than the proposed rate increases for the remainder of the plans.” The filing indicates that the rate increases range from 2 percent for Blue Cross Select Gold to 21.2 percent for Blue Value Silver. The rate filing also notes that two BCBSAL plans —Blue Secure Silver and Blue HSA Gold — would be sold only off-exchange. So the Blue Secure Silver plan did not have the cost of CSR added to the premiums, since nobody on that plan would have CSR benefits, as they’re only available on-exchange (Blue HSA Gold also did not have the cost of CSR added to premiums, as it’s a gold plan and also off-exchange).

The Trump Administration announced in October 2017 that CSR funding would end immediately, but BCBSAL and Bright Health had already made that assumption in their premiums for 2018. Since the government has stopped reimbursing insurers for the cost of CSR, the insurers have to collect higher premiums for those plans to offset the cost. But the vast majority of enrollees (including virtually everyone who receives CSR plans) are receiving premium subsidies, which fluctuate to keep pace with changing premiums.

The CSR approach that Alabama’s insurers have taken — adding the cost of CSR to on-exchange silver plans, while also making off-exchange silver plans available without the cost of CSR added to their premiums — is the approach that protects virtually all enrollees. People who qualify for premium subsidies are protected from the rate hike, because the cost of CSR is added to silver plans, and premium subsidies are based on silver plan rates (specifically, the second-lowest-cost silver plan in each area). So the subsidies keep silver plan rates fairly consistent from one year to the next, and the larger-than-normal premium subsidies can also be used to cover even more of the cost of plans at other metal levels.

People who aren’t eligible for premium subsidies can purchase plans at other metal levels that don’t have the cost of CSR added to the premiums. If they want a silver plan, they can purchase one that’s only marketed off-exchange (no premium subsidies are available off-exchange, so again, this is only a logical choice for applicants who are 100 percent certain that they won’t qualify for premium subsidies)

Larger subsidies result in very inexpensive bronze plans for many enrollees

Premium subsidies can be used to offset the cost of any metal-level plan (ie, anything but a catastrophic plan). So the larger subsidies that result from the cost of CSR being added to silver plan rates are adequate to keep the cost of the second-lowest-cost silver plan affordable. But they go even further (relative to 2017) when applied to bronze or gold plans, since the pre-subsidy rates on those plans didn’t increase by as much as the silver plans.

As an example, consider a family of four in Birmingham: 45-year-old parents, and two kids, ages 16 and 14 (we’ll keep them the same age in 2017, 2018, and 2019 to make it easier to compare apples to apples with the premiums). If this family earns $60,000/year, the lowest-cost plan available to them in the exchange was $93/month in 2017. But for 2018, they could get a plan for $1.19/month in premiums, and for 2019, there are two plans available with no premium at all (the children would be eligible for CHIP based on that income in all three years, so those premiums are just for the parents).

Insurance executive compensation is a secret in Alabama

Under a law passed in Alabama in 2015 (SB147, which became Act Number 2015-227 when it was signed into law in May), insurance executive compensation in Alabama is now kept confidential, and is not subject to open records requests, freedom of information requests, or subpoena.

The legislation was sponsored by Slade Blackwell (R, Mountain Brook), and passed with nearly unanimous support. It applies to all insurance companies in the state, but it primarily impacts Blue Cross Blue Shield — by far the dominant carrier in the state. That’s because national carriers, including Humana and UnitedHealthcare (the other two exchange carriers in Alabama) have to report executive compensation to the IRS and the SEC. But Blue Cross Blue Shield of Alabama (a state-based carrier) does not file with the SEC and doesn’t have to disclose executive compensation to the IRS.

Reporter John Archibald described the new law as “royal treatment” for BCBS of Alabama, and it’s certainly concerning that executive compensation for the carrier is now protected from the public eye. But residents of Alabama are still protected by the ACA’s medical loss ratio, which requires carriers to spend at least 80 percent (85 percent in the large group market) of premiums on medical care and “quality improvements,” with administrative expenses — including executive compensation — coming out of the remaining 20 percent (15 percent in the large group market).

Alabama exchange history

The federal government operates the health insurance marketplace in Alabama, based on then-Gov. Robert Bentley’s November 2012 decision against a state-run marketplace. Bentley cited annual operating costs of up to $50 million as his reason for opting for a federally operated exchange, although it should be noted that the federal government does not run its exchange for free — CMS charges a fee equal to 3.5 percent of premiums (proposed to drop to 3 percent of premiums as of 2020) in states that rely on the federally-run exchange.

The decision against a state-run exchange came somewhat as a surprise. While the Republican governor consistently opposed many provisions of the Affordable Care Act, he repeatedly expressed support for a state health insurance exchange. He supported exchanges during his campaign for governor, and as governor, he used an executive order to establish the Alabama Health Insurance Exchange Study Commission. In November 2011, that commission unanimously recommended Alabama implement a state-run exchange. However, bills to establish a state-run exchange failed to pass in both the 2011 and 2012 sessions.

Alabama has not expanded Medicaid. Gov. Bentley opposed Medicaid expansion, and his position became the subject of campaign ads, editorials, billboards, and websites during 2014. Late in 2014, Bentley reintroduced a discussion on Medicaid expansion. Bentley said his administration would explore options to obtain federal Medicaid funding for a state-designed solution with a work requirement for recipients. Conservative groups promptly accused Bentley of flip-flopping, but nothing had come of his Medicaid expansion talk as of 2017 when he resigned amid a scandal. His successor, Governor Kay Ivey, has rejected Medicaid expansion efforts since taking office in 2017.

An August 2014 study published by the Urban Institute showed the impacts of not expanding Medicaid. In terms of financial impact, the authors calculated that while Alabama would spend $1.08 billion to expand Medicaid over a ten-year period, the state is losing out on $14.4 billion in federal spending and state hospitals are losing $7.0 billion in reimbursement over the same period.

And from a humanitarian standpoint, a Kaiser Family Foundation analysis estimates that there are 235,000 Alabama residents in the coverage gap as a result of the state’s refusal to accept federal funding to expand Medicaid. These people are not eligible for Medicaid due to the state’s strict eligibility requirements, but they also aren’t eligible for ACA subsidies in the exchange because their incomes are under the poverty level.